Deal for Hebron project signed, finalized

Danny Williams, Premier of Newfoundland and Labrador, and the province's oil industry co-venturers have signed the final deal for the development of the province's fourth offshore oil project, Hebron.

Offshore staff

NEWFOUNDLAND AND LABRADOR -- Danny Williams, Premier of Newfoundland and Labrador, and the province's oil industry co-venturers have signed the final deal for the development of the province's fourth offshore oil project, Hebron.

The Hebron project, located approximately 350 km (217 mi) offshore the island portion of Newfoundland and Labrador, is a joint venture among the province's energy corporation, on behalf of the Government of Newfoundland and Labrador, Chevron Canada, ExxonMobil Canada, Petro-Canada, and StatoilHydro Canada.

Under the agreement, the Provincial Government, through its energy corporation, has become an equity owner with a 4.9% stake. In addition to an equity stake, the province has also negotiated major local industrial and employment benefits and a super royalty regime of an additional 6.5% on net revenues whenever monthly average oil prices exceed $50 West Texas Intermediate after net royalty payout occurs.

Based on the budget 2008 oil price estimate of $87 per barrel with a 2% allowance for inflation, the Provincial Government estimates that the 20-25 year project could generate approximately $20 billion for the province and that the Federal Government and other provinces are expected to receive more than $8 billion in revenues from the project. At today's prices, and allowing for inflation of 2%, this could be a project worth approximately $28 billion to the province, according to officials.

The proponents have committed to begin mobilization of the project team and to establish a Hebron project office in St. John's as soon as reasonably possible to begin detailed project planning. First oil is expected between 2016 and 2018 with production reaching a peak of approximately 150,000 b/d two years later.

The Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB) estimates that the development contains 581 MMbbl of recoverable oil. The agreement also commits $120 million for research and development over the life of the project to advance the industry in this province.

The Provincial Government is paying $110 million for its 4.9% equity share in the development and will pay its share of the pre-production and construction costs associated with the project.

The Provincial Government also announced today that it is transferring ownership of the Crown-owned Bull Arm fabrication, construction, and deepwater facility to the energy corporation. The transfer will ensure the facility is ready and available for the Hebron project.

The Bull Arm facility was constructed by the Hibernia Management and Development Co. in 1990 for the Hibernia project and was transferred to the province in 1998. Since that time, fabrication and other work associated with theTerra Nova FPSO, White Rose project, Voisey's Bay nickel project, and the Henry Goodrich drill rig have been completed at the site.

08/20/2008

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